Guangdong Free Trade Zone: The Trading Gateway to the Greater Bay Area

As part of continuous efforts to improve the business environment, mainland China recently further streamlined foreign trade approval across the country and in free trade zones. Hong Kong companies can establish Hong Kong-funded import-export enterprises in the China (Guangdong) Pilot Free Trade Zone and start trading there without first seeking approval or completing record filing formalities. Tapping import and export trade opportunities in the Guangdong-Hong Kong-Macao Greater Bay Area (GBA) will facilitate further exploitation of mainland China’s huge domestic market.

Reform and opening-up

Mainland China has been promoting business systems reform and streamlining administrative approval procedures to attract Hong Kong companies and other investors to do business on the mainland in recent years. One effective way to tap the mainland market potential is to set up a domestic sales or import-export company there.

Guangdong lies adjacent to Hong Kong and is connected by convenient transport and logistic networks. Its position as an important industrial production and product procurement base makes it easy for companies to map out development and cargo transportation plans according to their business situation, ship goods to Hong Kong and other overseas markets, or to sell overseas goods into the mainland. Setting up a Hong Kong-funded enterprise in Guangdong is an important window for entering the mainland, one that opens opportunities for tapping the huge GBA market for domestic sales and import-export trade.

According to the Foreign Trade Law of the People’s Republic of China, foreign trade operators engaged in the import and export of goods or technology must register for record filing purposes with the administrative department of foreign trade at the State Council or the institution entrusted thereby. Based on the Measures for Registration and Filing of Foreign Trade Operators, they are required to use the Ministry of Commerce unified business system platform to apply for record filing and registration as foreign trade operators. The mainland customs authorities will process the relevant customs declaration and release procedures for the enterprise’s goods import or export after application approval.

In July this year, the Ministry of Commerce released an implementation plan [1] aimed at deepening reform in separating business licences and operation permits and further stimulating the development of market vitality. It is worth noting that in the section on record filing and registration of foreign trade operators it is further stated that approval is replaced by record filing across the country. A highlight in this plan is that the competent department shall initiate filing procedures and will not make a decision to deny filing once an enterprise has submitted the required filing materials. The enterprise may proceed with import-export business after completing the filing and registration procedures.

Hong Kong companies can take advantage of Guangdong’s leading edge in manufacturing, logistics and transportation and the nationwide reform of record filing for foreign trade operators to develop import and export business on the mainland by setting up companies in Guangdong.

Scrapping approvals

Apart from the nationwide reform mentioned above, the implementation plan further deepens the pilot reform in free trade zones by scrapping approval requirements for foreign trade operators outright. Between 1 December 2019 and 30 November 2022, enterprises registered within the free trade zones for import and export activities are no longer required to complete record filing and registration formalities for foreign trade operators before importing or exporting goods. Nor are they required to submit materials on the record filing and registration of foreign trade operators for customs clearance to customs offices before staring operations.

These measures have greatly simplified the registration procedures for foreign trade business. In the Guangdong Free Trade Zone, for instance, Hong Kong-funded enterprises established within the zone, whether in the Nansha Area of Guangzhou, the Qianhai-Shekou Area of Shenzhen, or the Hengqin Area of Zhuhai, may start import-export business once they are issued the business licence. Scrapping foreign trade operator record filing and registration formalities saves companies time and cost from incorporation to actual commencement of import and export activities.

In June this year, the Guangdong provincial government also released its own implementation plan for deepening the reform of separating business licences and operation permits [2], putting forward measures to improve the efficiency of enterprises in the province. These measures, including the easing of domicile (place of business) restrictions and the simplification of proof of domicile requirements, make it more convenient for businesses to invest and operate in Guangdong. Hong Kong companies may make use of the free trade zone policy advantages and Guangdong’s business reform measures to start import and export business in the Guangdong Free Trade Zone.

Record filing formalities streamlining for foreign trade operators across the country, and the outright scrapping of foreign trade approval in the free trade zones make it much easier for Hong Kong companies to venture into the mainland for domestic sales and import-export trade. The release of the Outline Development Plan for the Guangdong-Hong Kong-Macao Greater Bay Area was followed by the introduction of measures to facilitate the launch of new business in the GBA for the benefit of investors. Using the Guangdong Free Trade Zone as a foothold, Hong Kong companies can exploit the resource advantages of the GBA to further tap potential business opportunities in the GBA market.

[1] For further details, please refer to Regulatory Alert – China: China Further Streamlines Foreign Trade Approval.

[2] For further details, please refer to Regulatory Alert – China: Guangdong Implements Reform of Enterprise-Related Services.